Shoot for the Stars? Predicting the Recruitment of Prestigious Directors at Newly Public Firms

Abstract

This study explores how CEOs’ and outside directors’ desires for signaling and homophily intertwine with their concerns over maintaining power and preserving local status hierarchies to affect the likelihood a firm recruits prestigious outside directors to its board in the years immediately following its initial public offering. Using pooled cross-sectional data from 210 IPOs conducted between 2001 and 2004, we found that prestigious CEOs and directors viewed the recruitment of prestigious new directors differently, and that these perceptions were moderated by perceived costs to the CEO and existing board members.